I am a “dyed in the wool” value investor, and have been for most of my professional career. The concept of buying assets and earnings for pennies on the dollar just makes an enormous amount of sense to me.
Over the years, I have made it a point to stay current on academic research, adding tools to the box that help select value stocks harboring fundamental strength and quality factors to improve stock selection.
In recent years, there has been a lot of research done about combining value, fundamental and quality factors with momentum, and the results of the studies have been quite positive.
To search for stocks that would fit these models I looked for stock with low price-to-book value that also have high Piotroski F-scores. Rather than reinvent the wheel, I then used Louis Navellier’s Portfolio Grader and focused on those that had high quantitative grades to select value stocks with the type of buying pressure that creates strong momentum.
Value Stocks With Growing Momentum: Republic Bancorp (RBCAA)
Republic Bancorp (RBCAA) has been one of my favorite banks the past couple of years. The bank has transformed itself from a high growth bank with a focus on tax refund loans to a regular old bank with a small tax anticipation loan practice.
They have made some smart acquisitions in the past few year and recently purchased Cornerstone Community Bancorp to gain access to the very prosperous and fast growing Tampa St. Petersburg market in Florida.
Republic has seen strong loan and earnings growth and is well positioned for what should be a strong year for community banks. The stock still trades below book value and a Piotroski F-score of 5. Republic Bancorp has a top quantitative grade of A so the stock is also a sold Value momentum selection.
Value Stocks With Growing Momentum: Atlantic American (AAME)
Atlantic American (AAME) is in a pretty basic business. They sell life, health and property and casualty insurance industries through independent agencies.
It operates through three companies: American Southern sells car insurance to businesses and municipalities covering everything from a fleet of company cars to a municipalities school busses; Bankers Fidelity sells specialized life and supplemental health products focused on the senior market; and xCalibre Benefits provides third-party administrative services for employee benefits programs.
AAME stock is trading at 95% of book value, has an f-score of 5 and earns a quantitative grade of A, so it qualifies as a solid value-momentum stock selection.
Value Stocks With Growing Momentum: Kelly Services (KELYA)
Kelly Services (KELYA) is one of the leading temporary staffing and consulting firms in the world today. It provides companies with administrative, professional and scientific staff.
As the global economy creeps toward a full recovery, business is getting better. In the most recent quarter, Kelly Services reported earnings of 23 cents vs 10 cents (excluding restructuring), a 130% increase year-over-year.
The global staffing giant has successfully cut costs and should see strong growth in revenues and earnings as the global economy gets stronger over the next few years. The company has an F-score of 6 and trades at a P/B value ratio of just 84%.
Shares of Kelly Services were just upgraded by Portfolio Grader to a B quantitative grade yesterday, so it is an emerging value momentum selection.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.